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Investors facing high inflation often ask whether gold is a smart place to put money. Gold can serve as portfolio insurance and a diversification tool, but over long periods it has tended to lag stocks. It’s best suited for conservative investors who want stability or a store of value more than growth.
Buying gold can mean owning the metal itself—bars or coins—or gaining exposure through ETFs, mutual funds, or shares of mining companies. You can buy physical gold from dealers or apps that store it for you, or choose funds such as SPDR Gold Shares (GLD), Invesco DB Gold Fund (DGL), Sprott Physical Gold Trust (PHYS), and others. For mining exposure, options include ETFs like VanEck Gold Miners (GDX) or individual stocks such as Barrick Gold and Equinox Gold. Futures and other derivatives exist too, but they’re better left to experienced traders.
Physical coins and bars each have benefits. Coins often trade more easily and clearly prove authenticity, while bars typically carry lower premiums per ounce and are simpler to store. Many services now sell fractional bars if you can’t afford a full one. Physical gold usually sells above spot price, and you should factor in storage, insurance, and potential certification costs.
People often call gold an inflation hedge, but the relationship isn’t consistent. Gold’s price has risen during some inflationary periods and not during others; sometimes gold’s price has moved independently of inflation because of geopolitics or investor sentiment. Studies have found that real estate and inflation-protected bonds have been more reliable hedges over long stretches, with gold ranking behind them.
Unlike stocks or bonds, gold produces no income. Its value rests on broad agreement that it’s worth something, along with its limited supply and long history as a desirable asset. That makes it a store of value rather than a cash-flow investment. Over many decades, stocks have typically outperformed gold; for investors seeking long-term capital growth, equities usually offer a better return.
Gold also carries extra costs and drawbacks. Physical gold can be stolen or counterfeited, and it’s taxed as a collectible in many places, which can mean higher rates. It’s a volatile asset, and unlike risky stocks that often reward holders with higher expected returns, gold’s risk/reward profile is generally poor by comparison. Still, a small allocation of gold can reduce overall portfolio volatility and act as ballast during severe market stress.
Cryptocurrencies present another alternative. Bitcoin and other digital assets are newer and far more volatile, but they’ve delivered much higher returns for early investors. The choice between crypto and gold depends on your goals and tolerance for risk: use crypto for high-risk, high-reward exposure; use gold for a long-standing, lower-risk store of value.
For most investors, a modest allocation—often 5% to 10% of a portfolio—to gold or other speculative assets is reasonable. That size gives you downside protection without significantly reducing long-term growth potential. Think of gold as insurance: something you hold in case of extreme events, while you build real wealth through stocks, real estate, and other productive assets.
